The Latest Tendencies and Perspectives of Legal Services in the Area of «Medical/Pharmaceutical Law»

Dmytro Aleshko, “Legal Alliance” Partner

Oleksii Bezhevets, “Legal Alliance” Partner

Illya Kostin, “Legal Alliance” Partner

For Yurydychna Gazeta

Medical and pharmaceutical law: development vectors

Medical law, being a practical activity on the protection of suppliers and consumers of medical services, is certainly a highly intellectual and therefore specific law area. As a result, this area becomes more and more attractive for ambitious lawyers. Nevertheless, the medical law institute is practically absent in Ukraine, which suggests the necessity of filling this niche, comparing to the situation in other developed countries. Of course there is a number of factors that make this sphere potentially attractive, but this is not about the present. First of all, a great deal makes low paying capacity of the majority of medical services consumers.

The opposite situation is observed in pharma. People suffer from diseases and unfortunately will continue suffering. The modern medicine (or it is better to say – «medical marketing») focuses on medicinal products with the demand adjusted according to the scheme “less money – cheaper medicines”, although it will never disappear. Therefore, pharma succeeds even in the conditions of strong competition that attracts the attention of regulators, controllers and government officials. This creates a favorable environment for legal business development in this industrial niche. It is worth to mention that the threshold for entering such legal business is quite high – due to the specifics of pharma business and its regulatory peculiarities. This does not frighten the law companies, although not every company manages to enter and secure a foothold in the new market with its recognized leaders. And the game is on.

Innovations in pharma. International procurements and their role in industry development

The new focus area that encountered in 2015-2016 – legal support of medicinal products procurement with the involvement of international organizations.

Since Ukraine gained its independence, the decision has been made for the first time concerning the transfer of the part of procurements from the Ministry of Health of Ukraine to the units of United Nations Organization and to British Crown Agents. These processes required the adoption of new law and regulations. «Legal Alliance» Team rendered a significant support to the development and approval of the corresponding policies. As there was no history of such practice in the country, the new model was elaborated from scratch, which provided for legitimate conduct of medicines’ procurement for Ukrainian patients at adequate prices.

First of all, it is worth to mention that due to the law amendments, the procurements via international organizations are not covered by the Law of Ukraine «On Public Procurements», which regulated the relations in public procurement area, as well as the Law of Ukraine «On the Conduct of Public Procurements», which was applicable up to August 1, 2016.

Centralized procurements of medicinal products and medical devices are performed in compliance with internal rules and procedures of international specialized organizations. This significantly reduced the time for necessary tenders conduct, the selection of suppliers and conclusion of relevant agreements.

Moreover, due to the amendment of the Law of Ukraine «On Medicinal Products» and other legal regulations, the registration procedures for medicines purchased under international procurements was significantly simplified, as well as the supply procedures for such medicinal products and medical devices etc. This ensures the acceleration of procurement process and supply of medicinal products and medical devices, and therefore the timely delivery of medicines to patients.

The Tax Code of Ukraine has also been amended, as well as the Procedures for import, supply and target use of medicinal products, medical devices that allow for the exemption of such operations from VAT taxation.

Apart from the abovementioned, other changes were introduced in order to effectively counteract the corruption, to make procurements more transparent and to save budgetary funds.

Upon the results of procurements for state budgetary funds in 2015 it became obvious how to adjust the legislation in order for the procurement system via international organizations to perform even better. Our Company elaborated the corresponding recommendations and provided them to responsible officials of MOH of Ukraine. It is worth to mention separately that the procurements of 2015 enabled the savings of budgetary funds in the amount of hundred millions of hryvnia. The state may spend these funds for the procurement of additional medicines that are severally required by Ukrainian patients.

Intellectual property in pharma

The situation concerning the protection of intellectual property rights for pharmaceutical developments in Ukraine remains unchanged during the long period, and there are still no signs of issues resolution.

At the same time, the problems of law enforcement practice may be comprised into the following theses: article 9 of the Law of Ukraine “On Medicinal Products” envisages that the applicant may receive a waiver of medicinal product registration in case the relevant decision of competent state authority violates the rights of the holder of valid invention patent of Ukraine.

Nevertheless, the bylaws provide another solution to this issue. In particular, the MOH Order №426 dated August 26, 2005 “On Approval of Procedures for Expertize of Registration Materials of Medicinal Products Submitted for State Registration (Re-registration) and for Expertize of Materials on Amendment of Registration Materials during the Term of Registration Certificate Validity”, requires the enforced court decision for such waiver.

Thus, the State Expert Center upon its expertise is authorized to recommend or not medicinal product for registration. Although there is no criteria in these recommendations confirming that such registration may potentially infringe the intellectual property rights of patent of Ukraine owners for their inventions. In other words, the letter guaranteeing that the intellectual property rights shall not be violated when submitting the documents for medicinal products registration by the applicant is just a formality.

The State Expert Center does not possess any tools for the prevention of invention property rights violation. Moreover, it is not easy for patent owner to obtain the information on application filing without the assistance. In the majority of cases the patent owner finds out about the registration of medicinal product that infringes his exclusive intellectual property rights after the adoption of relevant decision. In other words, only at the stage when the medicine’s instruction for use and the corresponding MOH order are already available to the public.

The mechanism allowing for tracking the medicines names, which are misleading for consumers and/or infringing the trade mark rights, is still absent in Ukraine. Already registered products that violate the intellectual property rights based on court decision are not eliminated from the medicinal products’ register automatically, as the Regulation № 411 on the State Register of Medicinal Products approved by the Cabinet of Ministers as of March 31, 2004, does not provide for such actions pursuant to court ruling.

Unfortunately, all new proposed Draft Laws of Ukraine “On Medicinal Products” do not envisage any mechanism for the protection of intellectual property rights in pharma. The policy makers do not deem this issue as a priority.

The whole complex of problems in judicial branch during the registration of medicinal products, as well as in executive branch, which is not able to arrange an efficient mechanism for intellectual property rights protection in pharma, resulted in reduction of innovation companies’ interest in the introduction of original medicinal products to Ukrainian market, especially those bestsellers with patent protection at the forefront. Therefore, the majority of litigations currently reside in the protection of trade mark rights.

Labor relations and their peculiarities in pharma market

The labor market is very specific in pharma industry. The high level of remunerations; the majority of industry employees possess several higher educations; tough corporate policies of pharmaceutical companies; high value of error; obligatory knowledge of foreign languages – all these factors significantly reduce the number of specialists in the market and complicate the labor relations. Unfortunately, we frequently witness the mistakes done by the market colleagues due to their poor awareness of these specifics. Just imagine the situation when the corporate policies are infringed and the manager is obliged to dismiss the employee who turns up to be a single father with infant child. The law prohibits this. Nevertheless, in this case it is possible to come to understanding with the employee, as well as with the employer. This requires being aware of all ins and outs of labor market. If the situation relates to commercial secret infringement, which requires the dismissal of manager, we may become witnesses of a real “action”.

The Labor Code of 1971 even with all amendments became out-of-date long time ago. This Code determines labor relations based on the socialist model of economy development. For the employer, especially from foreign pharmaceutical company, this is a real maze that requires searching for entrance each time when an employee should be dismissed. At the same time, this Code (together with other laws in this area) does not guarantee the employer easy legal relations, which means that the person without the degree in law may be greatly challenged, if not trapped. Everyone is waiting for the new Labor Code to be adopted. The Draft that was approved by the Parliament in the first reading in no event shall be named as “progress”. In fact, it is a codification of all existing bylaws that currently regulate labor relations. There are no system differences from acting Labor Code on the part of employer. It is to be hoped that another substantially amended draft code will be introduced for the second reading in the parliament. It is very hard to explain to international clients the reality of labor relations typical for our market.

Criminal and pharma business

Ironically, the majority of pharma managers today are aware of the existence of Criminal Code and it’s certain articles dedicated to exclusively pharmaceutical misconducts, although they are applied in practice very rarely. These are articles 191 and 209, articles 212, 364, 266, 367, 368, 369 of the criminal Code of Ukraine, etc. The article 321-1 “Counterfeit of medicinal products or selling of counterfeit medicinal products”, article 321-2 “Violation of designated procedures for pre-clinical studies, clinical trials and state registration of medicinal products”, as well as all other criminal offences are envisaged in Section XIII of the Criminal Code.

Unfortunately, our law enforcement system aims at setting the barriers, and not at fighting criminal activities. Law enforcement authorities frequently submit applications for the provision of documents pursuant to article 93 of the Criminal Code of Ukraine. When the company legitimately waives this request (for example, when there is no ruling for temporary access to the documents) they file a motion to the court regarding the search conduct. Afterwards comes the search together with nerves, seizure, and the whole complex of operative investigating measures... At the same time, everything is conducted without any notifications on illegal actions of company officials. Rumors become the basis for investigation. There were the detentions, as well as the deportations of foreign citizens being parma companies’ employees from Ukraine.

The activity of Ukrainian Security Service astonishes immensely, whose officers are guided by the law of Ukraine of intelligence in order to claim the documents. In particular, they illegally obtain the documents from state authorities and based on the report of their own officers initiate criminal proceedings. Thus, the transport militia paid a visit to our client last year, and the grounds for criminal proceeding was allegedly improper registration of medicinal product. Believe it or not, a transport militia!

Tomorrow we are going to protect the rights of pharmaceutical company before the law enforcement authorities believing that they revealed the essential elements of the offence envisaged by the article 209 of the Criminal Code of Ukraine “Legalization (laundering) of criminally-obtained revenues”. At the same time, we did not hear and see neither court verdicts, nor indictments concerning the so-called economic offences.

Currently, the issue is brought to the forefront concerning the implementation of personal responsibility of law enforcement officers for not bringing the case to the court verdict. Probably this whole mess will come to an end...